Disagreement, correlation and asset prices

When people agree to disagree, how does the disagreement affect asset prices? Within an equilibrium framework with two agents, two risky assets and a riskless bond, we analyze the joint impact of disagreement about expected payoff, variance and correlation, and compare prices with benchmark prices in a market with homogeneous beliefs. © 2012 Elsevier B.V

Disagreement in a Multi-Asset Market

This paper provides a simple framework to study the effect of disagreement in a multi-asset market equilibrium by considering two agents who disagree about expected returns, variances, and correlation of returns of two risky assets. When agents' subjective beliefs are characterized by mean preserving spreads of a benchmark homogeneous belief, we show that the effect of the disagreement does not cancel out in general and the effect in a multi-asset market can be very different from a single asset market. In particular, the market risk premium can increase and the risk-free rate can decrease significantly even when the market is overoptimistic and overconfident. © International Review of Finance Ltd. 2012

Index portfolio and welfare analysis under heterogeneous beliefs

© 2016 Elsevier B.V. With a growing popularity of index funds, we adopt a differences-in-opinion, general equilibrium framework to examine theoretically whether investors are better off with an index portfolio than active investing. In contrary to the conventional view, we find that, even for an active investor with the most accurate belief, switching to an index portfolio can significantly improve his expected ex-post welfare when the active investors have incorrect beliefs or face incomplete information. Moreover, the welfare improvement becomes more substantial when the active investors are more risk averse

Boundedly rational equilibrium and risk premium

When people agree to disagree, the impact of the disagreement among agents on the market is the main concern of this paper. With the standard mean variance framework, this paper considers a market of two risky assets and two agents who have different preference and disagreement about the mean and variance/covariance of the asset returns. By constructing a consensus belief, the paper develops an concept of boundedly rational equilibrium (BRE) to characterize the market equilibrium and examines explicitly the impact of heterogeneity on the market equilibrium and risk premium when the disagreements among the two agents are mean preserved spreads of a benchmark homogeneous belief. It shows that, in market equilibrium, the biased mean preserved spreads in beliefs among the two agents have significant impact on the risk premium of the risky assets and market portfolio, and adding a riskless asset in the market magnifies the impact of the heterogeneity on the market. The results show that both optimism/pessemism and confidence/doubt can increase the market risk premium and reduce the riskfree rate. © 2011 The Authors. Accounting and Finance © 2011 AFAANZ

A behavioural model of investor sentiment in limit order markets

© 2016 Informa UK Limited, trading as Taylor & Francis Group. By incorporating behavioural sentiment in a model of a limit order market, we show that behavioural sentiment not only helps to replicate most of the stylized facts in limit order markets simultaneously, but it also plays a unique role in explaining those stylized facts that cannot be explained by noise trading, such as fat tails in the return distribution, long memory in the trading volume, an increasing and non-linear relationship between trade imbalance and mid-price returns, as well as the diagonal effect, or event clustering, in order submission types. The results show that behavioural sentiment is an important driving force behind many of the well-documented stylized facts in limit order markets

Characterizing Spatiotemporal Dynamics of Methane Emissions from Rice Paddies in Northeast China from 1990 to 2010

BACKGROUND: Rice paddies have been identified as major methane (CH(4)) source induced by human activities. As a major rice production region in Northern China, the rice paddies in the Three-Rivers Plain (TRP) have experienced large changes in spatial distribution over the recent 20 years (from 1990 to 2010). Consequently, accurate estimation and characterization of spatiotemporal patterns of CH₄ emissions from rice paddies has become an pressing issue for assessing the environmental impacts of agroecosystems, and further making GHG mitigation strategies at regional or global levels. METHODOLOGY/PRINCIPAL FINDINGS: Integrating remote sensing mapping with a process-based biogeochemistry model, Denitrification and Decomposition (DNDC), was utilized to quantify the regional CH(4) emissions from the entire rice paddies in study region. Based on site validation and sensitivity tests, geographic information system (GIS) databases with the spatially differentiated input information were constructed to drive DNDC upscaling for its regional simulations. Results showed that (1) The large change in total methane emission that occurred in 2000 and 2010 compared to 1990 is distributed to the explosive growth in amounts of rice planted; (2) the spatial variations in CH₄ fluxes in this study are mainly attributed to the most sensitive factor soil properties, i.e., soil clay fraction and soil organic carbon (SOC) content, and (3) the warming climate could enhance CH₄ emission in the cool paddies. CONCLUSIONS/SIGNIFICANCE: The study concluded that the introduction of remote sensing analysis into the DNDC upscaling has a great capability in timely quantifying the methane emissions from cool paddies with fast land use and cover changes. And also, it confirmed that the northern wetland agroecosystems made great contributions to global greenhouse gas inventory

Microstructural and Mössbauer properties of low temperature synthesized Ni-Cd-Al ferrite nanoparticles

We report the influence of Al3+ doping on the microstructural and Mössbauer properties of ferrite nanoparticles of basic composition Ni0.2Cd0.3Fe2.5 - xAlxO4 (0.0 ≤ x ≤ 0.5) prepared through simple sol-gel method. X-ray diffraction (XRD), scanning electron microscopy (SEM), energy dispersive X-ray, transmission electron microscopy (TEM), Fourier transformation infrared (FTIR), and Mössbauer spectroscopy techniques were used to investigate the structural, chemical, and Mössbauer properties of the grown nanoparticles. XRD results confirm that all the samples are single-phase cubic spinel in structure excluding the presence of any secondary phase corresponding to any structure. SEM micrographs show the synthesized nanoparticles are agglomerated but spherical in shape. The average crystallite size of the grown nanoparticles was calculated through Scherrer formula and confirmed by TEM and was found between 2 and 8 nm (± 1). FTIR results show the presence of two vibrational bands corresponding to tetrahedral and octahedral sites. Mössbauer spectroscopy shows that all the samples exhibit superparamagnetism, and the quadrupole interaction increases with the substitution of Al3+ ions